Navigating the Home Inspection

Property inspections can be the bane of any real estate transaction.  Here is an intelligent article outlining a sensible, realistic approach to real estate inspections for both buyers and sellers:

The old Latin phrase caveat emptor — let the buyer beware — is most certainly true when it comes to purchasing a home.

home inspectionThus, home inspections are a common part of today’s residential real estate transactions, with more than three quarters of U.S. homebuyers ordering an inspection prior to purchasing their new home, according to a joint survey by the National Association of REALTORS® and the American Society of Home Inspectors. Among these homebuyers, 81 percent had a contingency plan for the inspection and 79 percent attended and participated in the home inspection.

Typically, a home inspector is hired by the buyer once the buyer and seller enter into a contract, which may be dependent on the home inspection. The inspector then conducts a rigorous examination of the property and submits a detailed report of the findings, which may include any areas of concern about the property, such as mold, structural issues and general wear and tear. What happens next can make or break the deal, says Debra Cahill, CRS, broker associate with Success Real Estate in Bridgewater, Massachusetts, who serves the market area from Braintree to the bridges of Cape Cod.

“There are home inspectors who scare the daylights out of buyers. They think that’s their job. Then there are home inspectors who educate and say that there’s no perfect home out there and help buyers understand the reports,” Cahill says.

REALTORS® can also be an important part of this education process, helping buyers and sellers understand what to expect before, during and after the home inspection. In doing so, they can make the process smoother and less likely to disrupt the transaction.

WORKING WITH INSPECTORS

Over the past several years, the home inspection process has changed, says Dan Steward, president and CEO of Pillar to Post, a home inspection franchise company based in Tampa, Florida. The “HGTV effect,” referring to television shows like House Hunters or Flip or Flop, where buyers and experts comb over home conditions, have left more buyers educated about what to expect, he says. As a result, consumers are asking for more information beyond just an evaluation of the structure and systems. They want to know about air and water quality, safety issues and other factors.

New technology has also made a big impact on the home-inspection industry. Steward says that his company’s inspectors use infrared thermography to detect areas of heat, which may indicate hot spots in wiring — often the result of a do-it-yourself wiring job that could be dangerous — or moisture, which may indicate leakage or potential mold issues, he says.

Veteran inspector Peter Daniele, founder of Professional Inspection, Inc., a home inspection company in Brick, New Jersey, says that many inspectors are more educated, as well. Good inspectors regularly take continuing education classes to stay up to date on current construction and energy-efficiency trends, he says. In addition, more inspectors are including additional services, such as testing for mold and radon.

“You want to look for that commitment to continuing education, along with good references and a steady background of being in the business full time,” he says.

WORKING WITH SELLERS

It’s a good idea for REALTORS® to prepare sellers prior to the home inspection, says Linda Kangrga, CRS with RE/MAX 100 in Columbia, Maryland. She advises them to review any structural problems or issues they’ve noticed with systems, such as flickering lights or leaky fixtures, prior to the inspector’s arrival. In addition, it’s likely an inspector will flag major wear and tear or cosmetic issues. If there are systems that are nearing the end of their life span — such as a furnace or roof that is near the end of its warranty — it’s a good idea to make those disclosures upfront. If sellers are not willing to make any repairs, that needs to be disclosed as well, indicating that the house is being sold “as is,” Cahill says. That manages expectations upfront for everyone involved.

Daniele says that sellers should contact their municipalities and see if any certificate of occupancy requirements have changed since they took residence. Some towns will require particular inspection of electrical outlets, smoke detectors, windows and other features. It’s important to make sure any repairs necessary to meet those requirements are made prior to the inspection, he says. Sellers should begin working a few months in advance. For example, clear out gutters and make sure water drains properly away from the house to ensure that the inspector doesn’t note a possible problem with foundation drainage.

Cahill says that even minor things can add up to deal-breakers for anxious buyers. She recommends repairing issues like tubs that don’t drain properly, poor lighting, and loose tiles, toilets and doorknobs. You can take some of the expense out of big jobs such as replacing a furnace or installing energy-efficient windows by taking advantage of tax credits, she says. Steward adds that structural and integrity issues such as foundational cracks and rot are important to address, along with “anything that’s obvious,” like missing handrails, which can present a safety issue.

Once the issue is documented in a home inspection report, the buyer may require that a licensed contractor be hired to complete the repairs, which can add to the expense, she says. In addition, the more problems the report documents, the greater the tension that can arise between buyers and sellers.

“The problem with things you know are wrong showing up on the home inspection is that when we find major things wrong that the seller should’ve known about, it causes the buyer to start wondering what else is wrong with the house that the seller didn’t take care of. It shows poor maintenance,” Kangrga says. “And those things can cause sellers to get their feelings hurt, especially people who think they’ve taken very good care of their house. I try to lay the groundwork there and explain to them that things happen to your house that you don’t necessarily see.”

WORKING WITH BUYERS

At the same time, buyers need to be reassured that not every item in a home inspection report is cause for panic, Cahill says. She says her favorite home inspector tells buyers that even if he was inspecting a brand new home, he could find something wrong with it. For example, most homes have mold, which often panics buyers, she says. The key is to understand what is dangerous or what might lead to a big expense and address those issues with the seller, either by having the seller fix the issue or through price concessions on the sale price of the home, so the buyer can have them fixed after moving in.

Steward says that his home inspectors print out the home inspection report on-site for the buyer so they can address any questions. His inspectors encourage the buyers to attend the home inspection or, at least, meet with them during the last 15 to 30 minutes of the inspection so the inspector can show the buyer the issues to which the report refers, and answer any questions.

“My job is not to give your house a rating on a scale of one to five, or 10 stars. My job is not to tell you whether you should buy the house or not, my job is not to tell you whether it’s worth the amount of money you’re paying for it — those are all your judgments. My job is to give you objective information, so ask as many questions as you want. I will tell you about all those things,” he says.

WORKING TOGETHER AFTER THE INSPECTION

Once the report comes back, the buyer may want repairs made or concessions to the selling price so he or she can make the repairs after taking over ownership of the home. This is where all parties need to work together if the deal is going to move forward, Cahill says.

“For my buyers, I typically recommend that anything that’s a hazard be fixed before they take residence. For things that might not be pleasant — like a window that’s foggy — then we may ask for a little off the selling price to free up some of their cash so they can do it themselves,” she says.

Daniele warns that buyers should be careful about how they use the home inspection findings as leverage. Of course, if there are major issues, they need to be addressed. However, in markets that are heating up again, being too nitpicky about report findings can backfire.

“In markets such as here in New Jersey, where there is not that much inventory, good houses are getting involved in bidding wars where there are back-up offers right behind the buyer whose bid was accepted. I often tell buyers not to get too picky with the small stuff. Every house is going to have issues — don’t ask for everything. If it’s insurmountable, move on to the next house,” he says.

Steward says that transparency is key to determining if the deal is still a good fit. Some buyers are very skilled at repairs and not afraid of reports that are full of them. Other buyers are strapped for cash and can’t afford to be facing down a five-figure roof replacement within a few years. But when the seller makes thorough disclosures about the house condition and the buyer is clear about what he or she will or will not accept, then the negotiations to determine whether the deal will close or whether the house and buyer are not a good match will move forward more smoothly, he says.

Information courtesy of Chicago Realtor Karen Breen Elia.

MAKING A POSITIVE DIFFERENCE IN PEOPLE’S LIVES.

Karen Breen Elia & Louis M. Elia, REALTORS®, are brokers for homes, condos, and multi-unit properties on Chicago’s North Side.

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Chicago IL 60657
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